The benefits from International trade far outweigh any feasible economic forecast that can be achieved through Protectionism. Although there are pros and cons to both, there is no denying that globalization has had the largest influence on global technological innovation, and without global trade, we would fail to make the necessary advancements needed to sustain our species.
argue that it has the potential to make this world a better place to live in and solve some of the deep-seated problems like unemployment and poverty.
Free trade is supposed to reduce barriers such as tariffs, value added taxes, subsidies, and other barriers between nations. This is not true. There are still many barriers to free trade. The Washington Post story says “the problem is that the big G20 countries added more than 1,200 restrictive export and import measures since 2008. The proponents say globalization represents free trade which promotes global economic growth; creates jobs, makes companies more competitive, and lowers prices for consumers.
Furthermore, the sharing of technology with developing nations will help them progress. True for small countries but stealing our technologies and IP have become a big problem with our larger competitors like China.
In the case for protectionism, if a country is trying to grow strong in a new industry, tariffs will protect it from foreign competitors. That gives the new industry’s companies time to develop their own competitive advantages. However, domestic industries and markets can only grow so much until they must embark on global trade, otherwise, they won’t be able to meet growing supply and demand.
Protectionism does temporarily create jobs for domestic workers. The protection of tariffs, quotas or subsidies allows domestic companies to hire locally, but again, if a company in a protectionist state wants to expand, they won’t be able to.
In the long term, Without competition, companies within the industry have no need to innovate. Eventually, the domestic product will decline in quality. It will be lower quality and more expensive than what foreign competitors produce.
Job outsourcing is a result of declining U.S. Competitiveness. Competition has declined from decades of the United States not investing in education. This is particularly true for high-tech, engineering, and science.
Increased trade opens new markets for businesses to sell their products. The Peterson Institute for International Economics estimates that ending all trade barriers would increase U.S. income by $500 billion.
Increasing U.S. protectionism will further slow economic growth. It would cause more layoffs, not fewer. If the United States closes its borders, other countries will do the same. This could cause layoffs among the 12 million U.S. workers who owe their jobs to exports.
Although certain policies in the US are pointing to more of a protectionist future, there will always remain an element of global trade within their economic arsenal because of the concept of comparative advantages. The US has withdrawn from the TPP, is looking to withdraw from NAFTA, while aims to increase import tariffs and focus more on service and manufacturing industries for their long-term economic development plan.
This can most definitely work in favor for the US, but it’s not hard to see that the more the United States withdraws from the Global economy, the more room emerging economies have to work with. This will indeed, be very beneficial for those living in developing nations, as outsourcing of US products will shift away from China and closer to other Asian or possibly even Latin America and African countries in the future because they pose no significant threat to US economic stability.
Developed country or developing country – both can implement protectionist policies to some degree of success – but without engaging in global trade to capitalize on their comparative advantage in the world market, capacities for growth are severely limited.
How do you think Donald Trump’s conservative economic approach will weigh out for the United States? Let us know in the comment section below.
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